Consumed by Budget Battle, Republicans Ignore the Economy

WASHINGTON -- As the government's partial shutdown enters its third week, the smell of an inconclusive deal is in the air, though one that has status quo written all over it.

After all the sound and fury over defunding Obamacare, or even delaying it, that issue has vanished for now as the attention turns to a grab bag of palliatives in the Senate to temporarily suspend the standoff and raise the debt ceiling for at least a few more months. The intense negotiating battle going on behind closed doors is about how short or long the extension will be and what each side gets in order to seal a deal.

Some of the options included repealing, or delaying, the tax on medical devices, tightening loose income rules on insurance subsidies under Obamacare, and Democrat demands to abandon the automatic sequester spending cuts.

Clearly, Congress -- including some of its most fire-breathing conservatives -- appears ready for a deal. "We need to get an agreement and open the government back up," says libertarian Sen. Rand Paul of Kentucky.

Even Texas Sen. Ted Cruz sounds like he may be open to a timeout, telling reporters, "We need to see what the details are."

If conservatives intend to hold out for a make-or-break deal, the automatic sequester cuts must be at the top of their list of demands. Love it or hate it, it's the only tool that has effectively kept a lid on spending.

The White House and the Democrats want to repeal it, because it's cutting into their favorite giveaway programs. But a new Congressional Budget Office (CBO) report now shows that in the first 11 months of the 2013 fiscal year, outlays were $127 billion less than last year.

When the CBO comes out with its final accounting for 2013, "overall federal spending may have fallen two years in a row for the first time since the end of the Korean War," The Wall Street Journal reports.

Moreover, a new report by the Congressional Research Service shows the sequester cuts have also been one of the most effective deficit-reduction weapons since the 1980s.

"In nominal (i.e., not adjusted for inflation) terms, the Budget Control Act achieves the greatest amount of deficit reduction of any act since 1988," the report says.

For nearly five years now, President Obama has been demanding that we raise income tax rates to reduce the deficit (even though he really wants to use that money to increase spending). But the sequester provisions in the 2011 budget act are reducing the deficit entirely by spending cuts.